e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|
|
|
þ |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2009
or
|
|
|
o |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission file number: 000-21134
International Fight League, Inc.
(Exact name of Registrant as specified in its charter)
|
|
|
Delaware
|
|
04-2893483 |
(State or Other Jurisdiction of
|
|
(I.R.S. Employer |
Incorporation or Organization)
|
|
Identification Number) |
|
|
|
7365 Main Street, #191 |
|
|
Stratford, CT
|
|
06614 |
(Address of Principal Executive Offices)
|
|
(ZIP Code) |
347-563-0060
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted to its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check One):
|
|
|
|
|
|
|
Large accelerated filer o |
|
Accelerated filer o |
|
Non-accelerated filer o (Do not check if a smaller reporting company) |
|
Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes þ No. o
As of July 31, 2009, there were 79,058,509 shares of common stock, par value $0.01 per share,
outstanding.
INTERNATIONAL FIGHT LEAGUE, INC.
INDEX
PART I.
FINANCIAL INFORMATION
|
|
|
Item 1. |
|
Financial Statements |
Certain information and footnote disclosures required under generally accepted
accounting principles have been condensed or omitted from the following condensed financial
statements pursuant to the rules and regulations of the Securities and Exchange Commission.
International Fight League, Inc. (the registrant, the Company, IFL, ILFI, we, us, or
our) believes that the disclosures are adequate to assure that the information presented is not
misleading in any material respect. The following condensed financial statements should be read in
conjunction with the year-end financial statements and notes thereto included in our Annual Report
on Form 10-K for the year ended December 31, 2008.
The results of operations for the interim periods presented herein are not necessarily
indicative of the results to be expected for the entire fiscal year, or any other period.
When we refer to our fiscal year in this report, we are referring to the fiscal year
ended on December 31 of that year. Thus, we are currently operating in our fiscal 2009 year, which
commenced on January 1, 2009. Unless the context expressly indicates a contrary intention, all
references to years in this filing are to our fiscal years.
3
INTERNATIONAL FIGHT LEAGUE, INC.
CONDENSED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
|
|
|
2009 |
|
|
December 31, |
|
|
|
(unaudited) |
|
|
2008 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
87,719 |
|
|
$ |
118,468 |
|
Prepaid expenses |
|
|
124,075 |
|
|
|
228,555 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
211,794 |
|
|
|
347,023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net of accumulated depreciation and amortization |
|
|
625 |
|
|
|
1,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
212,419 |
|
|
$ |
348,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS DEFICIT |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
18,250 |
|
|
$ |
7,340 |
|
Accrued expenses and other current liabilities |
|
|
36,910 |
|
|
|
66,568 |
|
Loss in excess of investment in Equity Investee |
|
|
801,421 |
|
|
|
466,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
856,581 |
|
|
|
540,653 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments |
|
|
|
|
|
|
|
|
Stockholders deficit: |
|
|
|
|
|
|
|
|
Common stock, $0.01 par value per share; 150,000,000 shares authorized;
79,058,509 shares issued and outstanding at June 30, 2009 and December
31, 2008 |
|
|
790,562 |
|
|
|
790,562 |
|
Additional paid-in capital |
|
|
36,367,772 |
|
|
|
36,304,680 |
|
Accumulated deficit |
|
|
(37,802,496 |
) |
|
|
(37,287,722 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders deficit |
|
|
(644,162 |
) |
|
|
(192,480 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders deficit |
|
$ |
212,419 |
|
|
$ |
348,173 |
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the condensed interim financial statements.
4
INTERNATIONAL FIGHT LEAGUE, INC.
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, |
|
|
For the six months ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
expenses |
|
|
18,419 |
|
|
|
220,018 |
|
|
|
65,356 |
|
|
|
421,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
31,379 |
|
|
|
79,035 |
|
|
|
158,535 |
|
|
|
159,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Equity Investee |
|
|
(131,073 |
) |
|
|
|
|
|
|
(290,950 |
) |
|
|
|
|
Interest expense |
|
|
|
|
|
|
(1,286 |
) |
|
|
(180 |
) |
|
|
(2,535 |
) |
Interest income |
|
|
57 |
|
|
|
11,592 |
|
|
|
247 |
|
|
|
54,887 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses), net |
|
|
(131,016 |
) |
|
|
10,306 |
|
|
|
(290,883 |
) |
|
|
52,352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
|
(180,814 |
) |
|
|
(288,747 |
) |
|
|
(514,774 |
) |
|
|
(529,158 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations |
|
|
|
|
|
|
(2,158,531 |
) |
|
|
|
|
|
|
(4,229,718 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(180,814 |
) |
|
|
(2,447,278 |
) |
|
|
(514,774 |
) |
|
|
(4,758,876 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common sharebasic and
diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
Discontinued operations |
|
$ |
|
|
|
$ |
(0.03 |
) |
|
$ |
|
|
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(0.00 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.06 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstandingbasic and diluted |
|
|
79,058,509 |
|
|
|
79,058,509 |
|
|
|
79,058,509 |
|
|
|
79,058,509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the condensed interim financial statements.
5
INTERNATIONAL FIGHT LEAGUE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Loss from discontinued operations |
|
$ |
|
|
|
$ |
(4,229,718 |
) |
Loss from continuing operations |
|
|
(514,774 |
) |
|
|
(529,158 |
) |
|
|
|
|
|
|
|
Net loss |
|
|
(514,774 |
) |
|
|
(4,758,876 |
) |
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Loss from Equity Investee |
|
|
290,950 |
|
|
|
|
|
Selling, general and administrative expenses paid by Equity Investee |
|
|
43,726 |
|
|
|
|
|
Depreciation and amortization |
|
|
525 |
|
|
|
55,051 |
|
Loss on disposal of property and equipment |
|
|
|
|
|
|
13,612 |
|
Share-based compensation expense |
|
|
158,535 |
|
|
|
331,900 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Prepaid expenses |
|
|
9,037 |
|
|
|
93,068 |
|
Current assets from discontinued operations |
|
|
|
|
|
|
373,481 |
|
Accounts payable from continuing operations |
|
|
10,910 |
|
|
|
(75,454 |
) |
Accrued liquidated damages |
|
|
|
|
|
|
(456,045 |
) |
Accrued expenses and other current liabilities from continuing
operations |
|
|
(29,658 |
) |
|
|
(82,500 |
) |
Accrued expenses and other current liabilities from discontinued
operations |
|
|
|
|
|
|
(605,214 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(30,749 |
) |
|
|
(5,110,977 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by investing activities: |
|
|
|
|
|
|
|
|
Refund of security deposits |
|
|
|
|
|
|
3,243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
(30,749 |
) |
|
|
(5,107,734 |
) |
Cash and cash equivalents at beginning of period |
|
|
118,468 |
|
|
|
6,120,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
87,719 |
|
|
$ |
1,012,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid during the period for interest |
|
$ |
180 |
|
|
$ |
2,535 |
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the condensed interim financial statements.
6
INTERNATIONAL FIGHT LEAGUE, INC.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
NOTE 1NATURE OF OPERATIONS AND GOING CONCERN UNCERTAINTY
During the three month period ended September 30, 2008, International Fight League, Inc.
(IFLI), ceased the operations of its wholly-owned subsidiary, IFL Corp. (IFLC), through which
all operations were conducted, and on September 15, 2008, IFLC voluntarily filed a petition for
reorganization relief under Chapter 11 of the United States Bankruptcy Code (Bankruptcy Code) in
the United States Bankruptcy Court for the Southern District of New York (the Court). IFLCs
bankruptcy case is docketed as In re IFL Corp., Case No. 08-13589 (MG). On November 17, 2008, IFLC
sold substantially all of its assets to HDNet LLC (HDNet) pursuant to a sale under Section 363 of
the Bankruptcy Code which was approved by the Court on October 28, 2008. IFLC is operating its
business and managing its assets as a debtor in possession pursuant to sections 1107(a) and 1108
of the Bankruptcy Code. On August 5, 2009, the Court approved a disclosure statement (Disclosure
Statement) filed by IFLC, which described its plan of liquidation, which is attached to the
Disclosure Statement (the Plan). Pursuant to the Plan, IFLCs remaining assets will be used to
satisfy its creditors, and IFLIs equity interest in IFLC will be terminated with no payment. A
hearing to confirm the Plan is scheduled for September 14, 2009. If confirmed by creditors and
approved by the Court, the Plan will result in the liquidation of IFLC soon after its confirmation.
IFLI plans to operate as a shell company on a continuing basis.
The Company refers to the accounts of IFLI and IFLC through September 15, 2008 and IFLI
subsequent to that date.
The accompanying condensed financial statements have been prepared using accounting principles
generally accepted in the United States applicable for a going concern which assumes that the
Company will realize its assets and discharge its liabilities in the ordinary course of business,
and all applicable rules and regulations of the U.S. Securities and Exchange Commission. At June
30, 2009, the Company had cash of $87,700 and an accumulated deficit of $37,803,000, and has no
business operations.
The Company is exploring its options to realize value for its stockholders, which may include
seeking a reverse merger transaction with a party with operations. The Company has no present
avenues of financing, no source of revenues and no present plans to obtain interim financing while
continuing to explore its options. As a result of the foregoing, the lack of liquidity and funding
sources pose a substantial risk to the ongoing viability of the Company. These conditions raise
substantial doubt about the Companys ability to continue as a going concern. These condensed
financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
NOTE 2BASIS OF PRESENTATION, DESCRIPTION OF BUSINESS AND EQUITY INVESTMENT IN INVESTEE
In accordance with Accounting Research Bulletin (ARB) No. 51 Consolidated Financial
Statements-As Amended (ARB 51), the Company was required to deconsolidate IFLC upon the filing
of its petition for reorganization relief under Chapter 11 in September 2008. Under ARB No. 51, a
majority owner is deemed to have lost control over a subsidiary if the subsidiary is in legal
reorganization or bankruptcy. These conditions preclude consolidation as control rests with the
bankruptcy court, rather than the majority owner. Accordingly, IFLI deconsolidated IFLC as of
September 15, 2008, eliminating all future operations from the financial results of operations.
Since September 16, 2008, the operations of IFLIs wholly-owned subsidiary IFLC have, therefore,
been accounted for under the equity method of accounting.
Generally accepted accounting principles require that an investment in an investee be reported
using the equity method under Accounting Principles Board (APB) Opinion No. 18, The Equity
Method of Accounting for
Investments in Common Stock, when an investor corporation can exercise significant influence
over the operations and financial policies of an investee corporation. When the equity method of
accounting is used, the investor initially records the investment in the stock of an investee at
cost. The investment account is then adjusted to recognize the investors share of the income or
losses of the investee after the date of acquisition when it is earned
7
INTERNATIONAL FIGHT LEAGUE, INC.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
by the investee. Such
amounts are included when determining the net income of the investor in the period they are
reported by the investee.
Based on the loss of control over IFLC and the uncertainties surrounding the nature, timing
and specifics of the bankruptcy proceedings, IFLI deconsolidated IFLC as of September 15, 2008,
eliminating all results from that point forward associated with its balance sheets, statements of
operations and cash flows. The Companys previously reported consolidated balance sheets,
consolidated statements of operations and consolidated cash flows prior to September 15, 2008
continue to include IFLCs financial condition, results of operations and cash flows.
The accompanying unaudited condensed financial statements represent the accounts of IFLI and
IFLC as of June 30, 2008 and for the three and six month periods then ended, and the accounts of
IFLI only as of June 30, 2009 and for the three and six month periods then ended. All intercompany
accounts and transactions have been eliminated in consolidation. These unaudited condensed
financial statements reflect all adjustments (consisting of normal recurring accruals) that are
considered necessary for a fair presentation of financial position and results of operations as of
and for the periods presented. The Company is required to make estimates and assumptions that
affect the amounts reported in the unaudited condensed financial statements and footnotes.
Estimates and assumptions are periodically reviewed and the effects of any material revisions are
reflected in the period that they are determined to be necessary.
For the six months ended June 30, 2009, the operations of IFLC have been accounted for under
the equity method of accounting and are disclosed as activity related to Equity Investee in the
accompanying condensed financial statements. The assets and liabilities of IFLC are excluded from
the balance sheets as of December 31, 2008 and June 30, 2009 (see Note 5). Since IFLCs results
after September 15, 2008 are not consolidated with IFLIs results, and because IFLI believes it
will not be obligated to fund losses related to its investment in IFLC, under principles of
consolidation, any material uncertainties related to IFLCs future operations are not expected to
impact IFLIs financial results.
NOTE 3RECENTLY ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS
Effective July 1, 2009, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Standards (SFAS) No. 168, The Hierarchy of Generally Accepted Accounting Principles
(SFAS No. 168). SFAS No. 168 reduces the U.S. GAAP hierarchy to two levels, one that is
authoritative and one that is not. The adoption of this pronouncement is not expected to have a
material effect on the financial statements.
In June 2009, the FASB issued SFAS No. 167, Amending FASB Interpretation No. 46(R) (SFAS No.
167). SFAS No. 167 amends FIN 46(R) in determining whether an enterprise has a controlling
financial interest in a variable interest entity. This determination identifies the primary
beneficiary of a variable interest entity as the enterprise that has both the power to direct the
activities of a variable interest entity that most significantly impacts the entitys economic
performance, and the obligation to absorb losses or the right to receive benefits of the entity
that could potentially be significant to the variable interest entity. SFAS No. 167 also requires
ongoing reassessments of whether an enterprise is the primary beneficiary and eliminates the
quantitative approach previously required for determining the primary beneficiary. SFAS No. 167 is
effective January 1, 2010. The adoption of this pronouncement is not expected to have a material
effect on the financial statements.
In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, an
amendment of FASB Statement No. 140 (SFAS No. 166). Among other items, SFAS No. 166 removes the
concept of a qualifying special-purpose entity and clarifies that the objective of paragraph 9 of
SFAS No. 140 is to determine whether a transferor and all of the entities included in the
transferors financial statements being presented have
surrendered control over transferred financial assets. SFAS No. 166 is effective
January 1, 2010. The Company does not expect the adoption of this pronouncement to have a material
effect on the financial statements.
8
INTERNATIONAL FIGHT LEAGUE, INC.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
In June 2008, the FASB issued FASB Staff Position (FSP) EITF Issue No. 03-6-1,
Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating
Securities (FSP EITF 03-6-1). FSP EITF 03-6-1 provides that unvested share-based payment awards
that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid)
are participating securities and shall be included in the computation of earnings per share
pursuant to the two-class method. FSP EITF 03-6-1 is effective for fiscal years beginning after
December 15, 2008, and interim periods within those years. Upon adoption, a company is required to
retrospectively adjust its earnings per share data (including any amounts related to interim
periods, summaries of earnings and selected financial data) to conform to the provisions of FSP
EITF 03-6-1. The adoption of FSP EITF 03-6-1 had no impact on the Companys financial statements.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments
and Hedging Activities, an amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 requires
enhanced disclosures about an entitys derivative and hedging activities. Entities will be
required to provide enhanced disclosures about: (a) how and why an entity uses derivative
instruments; (b) how derivative instruments and related hedge items are accounted for under SFAS
No. 133 and its related interpretations; and (c) how derivative instruments and related hedge items
affect an entitys financial position, financial performance and cash flows. The Company is
required to adopt SFAS 161 beginning in fiscal year 2009. The adoption of SFAS 161 has had no
effect on the financial statements.
In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in
Consolidated Financial Statements an amendment of ARB No. 51 (Consolidated Financial Statements)
(SFAS 160). SFAS 160 establishes accounting and reporting standards for a non-controlling
interest in a subsidiary and for the deconsolidation of a subsidiary. In addition, SFAS 160
requires certain consolidation procedures for consistency with the requirements of SFAS 141(R),
Business Combinations. SFAS 160 is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008 with earlier adoption prohibited. The
adoption of SFAS 160 did not have a significant impact on the financial statements.
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (SFAS
141(R)). SFAS 141(R) expands the definition of transactions and events that qualify as business
combinations; requires that the acquired assets and liabilities, including contingencies, be
recorded at the fair value determined on the acquisition date and changes thereafter be reflected
in revenue, not goodwill; changes the recognition timing for restructuring costs; and requires
acquisition costs to be expensed as incurred. Adoption of SFAS 141(R) is required for combinations
after December 15, 2008. Early adoption and retroactive application of SFAS 141(R) to fiscal years
preceding the effective date are not permitted. The adoption of SFAS 141(R) did not have a
significant impact on the financial statements.
NOTE 4 RECLASSIFICATIONS
Certain 2008 balances have been reclassified in order to conform to the 2009 presentation.
NOTE 5EQUITY METHOD OF INVESTEE, LOSS IN EXCESS OF INVESTMENT IN EQUITY INVESTEE AND FINANCIAL
INFORMATION OF DECONSOLIDATED SUBSIDIARY
From September 16, 2008, the day after IFLC filed its bankruptcy petition, through June 30,
2009, the operations of IFLC have been accounted for under the equity method of accounting due to
the loss of control by IFLI as described in Note 2. Summarized financial information of IFLC as of
June 30, 2009 and December 31, 2008 and for the three and six month periods ended June 30, 2009 and
June 30, 2008 is as follows:
9
INTERNATIONAL FIGHT LEAGUE, INC.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
(unaudited) |
|
|
(unaudited) |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Revenues |
|
$ |
|
|
|
$ |
902,916 |
|
|
$ |
|
|
|
$ |
1,185,247 |
|
Cost of sales |
|
|
|
|
|
|
1,874,180 |
|
|
|
|
|
|
|
2,893,991 |
|
Selling, general
and administrative
expenses |
|
|
99,514 |
|
|
|
1,102,474 |
|
|
|
183,902 |
|
|
|
2,352,767 |
|
Other expense, net |
|
|
31,559 |
|
|
|
84,793 |
|
|
|
107,048 |
|
|
|
168,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(131,073 |
) |
|
$ |
(2,158,531 |
) |
|
$ |
(290,950 |
) |
|
$ |
(4,229,718 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the assets, liabilities and net equity of IFLC as of June
30, 2009 and the calculation of the loss in excess of investment in Equity Investee which was
recorded on the Companys condensed balance sheets at June 30, 2009 and December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
|
|
|
|
|
(unaudited) |
|
|
December 31, 2008 |
|
Cash |
|
$ |
304,293 |
|
|
$ |
523,096 |
|
Other assets |
|
|
3,262 |
|
|
|
4,188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets deconsolidated |
|
|
307,555 |
|
|
|
527,284 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable subject to compromise (A) |
|
|
218,773 |
|
|
|
134,858 |
|
Accrued liabilities subject to compromise (A) |
|
|
890,203 |
|
|
|
859,171 |
|
Due to International Fight League, Inc., subject to compromise (A) |
|
|
34,087,962 |
|
|
|
34,061,783 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities deconsolidated |
|
|
35,196,938 |
|
|
|
35,055,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net equity/negative investment |
|
$ |
(34,889,383 |
) |
|
$ |
(34,528,528 |
) |
|
|
|
|
|
|
|
The loss in excess of investment in Equity Investee is comprised of:
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
|
|
|
|
|
(unaudited) |
|
|
December 31, 2008 |
|
Net equity/negative investment |
|
$ |
(34,889,383 |
) |
|
$ |
(34,528,528 |
) |
Due to International Fight League, Inc. (A) |
|
|
34,087,962 |
|
|
|
34,061,783 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss in excess of investment in Equity Investee |
|
$ |
(801,421 |
) |
|
$ |
(466,745 |
) |
|
|
|
|
|
|
|
|
|
|
(A) Liabilities Subject to Compromise: Liabilities subject to compromise refer to both
secured and unsecured obligations that will be accounted for under the plan of
reorganization, including claims incurred prior to the petition date. They represent the
debtors current estimate of the amount of known or potential pre-petition claims that are
subject to restructuring in the chapter 11 case. Such claims remain subject to future
adjustments. Related party and insider liabilities, such as amounts due to IFLI, are
subordinated to the claims of other creditors. |
Subsequent to IFLCs petition for reorganization relief under chapter 11 of the Bankruptcy
Code in the Court, IFLC has been operating its business and managing its affairs as a debtor in
possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. On November 17, 2008,
IFLC sold substantially all of its assets to
HDNet LLC (HDNet) for $650,000 cash and the assumption by HDNet of certain obligations,
pursuant to a sale under Section 363 of the Bankruptcy Code which was approved by the Court on
October 28, 2008.
10
INTERNATIONAL FIGHT LEAGUE, INC.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
The financial information above for IFLC has been prepared in conformity with Statement of
Position 90-7 Financial Reporting by Entities in Reorganization Under the Bankruptcy Code (SOP
90-7), which requires that the liabilities subject to compromise by the Bankruptcy Court are
reported separately from the liabilities not subject to compromise, and that all transactions
directly associated with the plan of reorganization be reported separately as well. Liabilities
subject to compromise include pre-petition unsecured claims that may be settled at amounts that
differ from those recorded in IFLCs condensed balance sheets.
NOTE 6DISCONTINUED OPERATIONS
On September 15, 2008, IFLC voluntarily filed a petition under chapter 11 of the Bankruptcy
Code with the Court. The Company ceased operations in the quarter ended September 30, 2008, prior
to the filing of the bankruptcy petition by IFLC. Accordingly, the Company has reported the
results of its mixed martial arts (MMA) operations as discontinued operations. The following
summarizes the results of discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, 2008 |
|
|
June 30, 2008 |
|
|
|
(unaudited) |
|
|
(unaudited) |
|
|
|
|
Revenues |
|
$ |
902,916 |
|
|
$ |
1,185,247 |
|
Cost of revenues |
|
$ |
2,893,991 |
|
|
$ |
1,874,180 |
|
Loss from discontinued operations |
|
$ |
(2,158,531 |
) |
|
$ |
(4,229,718 |
) |
NOTE 7LOSS PER SHARE
The Company complies with the accounting and reporting requirements of SFAS No. 128, Earnings
Per Share. Basic earnings per share (EPS) excludes dilution and is computed by dividing income
(loss) applicable to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS is based upon the weighted average number of common shares
outstanding during the period plus the additional weighted average common equivalent shares during
the period. Common equivalent shares result from the assumed exercises of outstanding stock
options and warrants, the proceeds of which are then assumed to have been used to repurchase
outstanding shares of common stock (the treasury stock method). Common equivalent shares are not
included in the per share calculations where the effect of their inclusion would be anti-dilutive.
Inherently, stock options and warrants are deemed to be anti-dilutive when the average market price
of the common stock during the period exceeds the exercise price of the stock options or warrants.
At June 30, 2009 and 2008, the Companys common stock equivalents include stock options
outstanding of 817,131 and 2,977,576, respectively, and warrants outstanding of 14,294,513, and
14,544,513, respectively. These common stock equivalents are not included in the diluted EPS
calculations because the effect of their inclusion would be anti-dilutive or would decrease the
loss per common share.
NOTE 8INCOME TAXES
The Company files a federal U.S. income tax return and income tax returns in certain other
states and cities. Tax returns for the years 2007 through 2008 remain open for examination in
various tax jurisdictions in which it operates. The Company adopted the provisions of FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an Interpretation of FASB
Statement No. 109, Accounting for Income Taxes (FIN 48), on January 1, 2007. As a result of the
implementation of FIN 48, the Company recognized no material adjustment in the liability for
unrecognized income tax benefits. At the adoption date of January 1, 2007, and at June 30, 2009,
there were no unrecognized tax benefits. Interest and penalties related to uncertain tax positions
will be recognized in income tax expense. As of June 30, 2009, no interest related to uncertain
tax positions had been accrued.
NOTE 9STOCK OPTION PLAN
Accounting for stock options issued to employees follows the provisions of SFAS No. 123(R),
Share-Based Payment and the SECs Staff Accounting Bulletin (SAB) No. 107, Valuation of
Share-Based Payment
11
INTERNATIONAL FIGHT LEAGUE, INC.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
Arrangements for Public Companies. This statement requires an entity to
measure the cost of employee services received in exchange for an award of equity instruments based
on the grant-date fair value of the award. That cost will be recognized over the period during
which an employee is required to provide service in exchange for the award. The Company uses the
Black-Scholes option pricing model to measure the fair value of options granted to employees.
During the year ended December 31, 2006, the Company adopted the new 2006 Equity Incentive
Plan (the Plan), which permits the grant of share options and other forms of share-based awards
to its employees and service providers for up to 5,000,000 shares of the Companys common stock.
Option awards generally vest based on 3 years of continuous service and have 10-year contractual
terms. Certain option and share awards provide for accelerated vesting if there is a change in
control (as defined in the Plan).
Option activity under the Plan for the six months ended June 30, 2009 (unaudited) is
summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Weighted |
|
Remaining |
|
|
|
|
|
|
Average |
|
Contractual |
|
|
Options |
|
Exercise Price |
|
Term |
Outstanding at January 1, 2009 |
|
|
1,031,236 |
|
|
$ |
0.41 |
|
|
|
|
|
Cancelled |
|
|
(379,617 |
) |
|
$ |
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2009 |
|
|
651,619 |
|
|
$ |
0.58 |
|
|
8.0 years |
Exercisable at June 30, 2009 |
|
|
351,619 |
|
|
$ |
0.55 |
|
|
|
|
|
In connection with grants of options issued under the Plan, compensation costs of $31,379 and
$63,092 were charged against operations for the three and six months ended June 30, 2009,
respectively and compensation costs were $62,970 and $127,483 for the three and six months ended
June 30, 2008, respectively.
Restricted Stock
The fair value of restricted stock awards is determined based upon the number of shares
awarded and the quoted price of our common stock on the date of the grant. The fair value of the
award is recognized as an expense over the service or vesting period, net of forfeitures, using the
straight-line method under SFAS No. 123(R). Because the Company does not have historical data on
forfeitures and has made only one grant of restricted stock, forfeitures are calculated based upon
actual forfeitures, not estimates or assumptions.
In May 2007, the Company granted its only restricted stock award for 125,000 shares to
its President, Chief Financial Officer and General Counsel. Costs of $95,443 were recognized as
stock compensation expense for the six month period ended June 30, 2009 and no costs were
recognized during the three month period ended June 30, 2009. Costs of $47,656 and $95,182 were
recognized as compensation expense for the three and six months ended June 30, 2008, respectively,
related to this award. All of the shares were vested as of March 31, 2009.
NOTE 10WARRANTS
The Company has issued a total of 14,611,180 warrants to purchase common stock at prices
ranging from $.30 per share to $1.25 per share. Of this total, 13,976,180 were issued in
connection with the Companys December 2006 and August 2007 private placements, are fully vested
and no charges to earnings were recognized. The remaining 635,000 warrants were issued during the
quarter ended June 30, 2007 as incentive compensation to league coaches and as compensation to a
consultant to the Company, of which 318,333 were outstanding and vested as of June 30, 2009. All
costs for the issuance of these warrants have been recognized in prior periods, therefore no
charges were recognized during the three or six month periods ended June 30, 2009.
12
INTERNATIONAL FIGHT LEAGUE, INC.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
NOTE 11 SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the time it filed its quarterly report on
Form 10-Q on August 19, 2009.
13
|
|
|
Item 2. |
|
Managements Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with our condensed financial statements and related notes appearing
elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K filed on April
15, 2009. In addition to historical information, this discussion and analysis contains
forward-looking statements that are based on current expectations, estimates, forecasts and
projections about us, our future performance and the industries in which we operate as well as on
our managements assumptions. These forward-looking statements involve risks and uncertainties.
When used in this Quarterly Report on Form 10-Q the words anticipate, objective, may,
might, should, could, can, intend, expect, believe, estimate, predict, targets,
goals, projects, seeks, potential, plan, is designed to or the negative of these and
similar expressions identify forward-looking statements. While we believe our plans, intentions
and expectations reflected in those forward-looking statements are reasonable, we cannot assure you
that these plans, intentions or expectations will be achieved. Other than as required by
applicable securities laws, we are under no obligation to update any forward-looking statement,
whether as result of new information, future events or otherwise. Our actual results may differ
materially from those anticipated in these forward-looking statements as a result of certain
factors, including but not limited to, those set forth under Item 1A, Risk Factors, and elsewhere
in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended
December 31, 2008.
Overview, Discontinued Operations and Sale of Assets
Our business was founded in 2005 to organize, host and promote live and televised professional
mixed martial arts (MMA) sporting events under the name International Fight league or IFL and
to capitalize on the growing popularity of MMA in the United States and around the world. In
June 2008, we announced that our event scheduled for August 15, 2008 had been canceled and on
September 15, 2008, our wholly-owned subsidiary IFLC, through which we conducted our operations and
which held substantially all of our assets, voluntarily filed a petition for reorganization relief
under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern
District of New York (the Court). IFLCs bankruptcy case is docketed as In re IFL Corp., Case
No. 08-13589 (MG). IFLC is operating its business and managing its assets as a debtor in
possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. On November 17, 2008,
IFLC sold substantially all of its assets to HDNet LLC (HDNet) for $650,000 cash and the
assumption by HDNet of certain obligations, pursuant to a sale under Section 363 of the Bankruptcy
Code which was approved by the Court on October 28, 2008.
On August 5, 2009, the Court approved a disclosure statement (Disclosure Statement) filed by
IFLC, which described its plan of liquidation, which is attached to the Disclosure Statement (the
Plan). Pursuant to the Plan, IFLCs remaining assets will be used to satisfy its creditors, and
IFLIs equity interest in IFLC will be terminated with no payment. A hearing to confirm the Plan
is scheduled for September 14, 2009. If confirmed by the Court, the Plan will result in the
liquidation of IFLC soon after its confirmation.
With the sale of substantially all of our assets to HDNet and with no active business
operations or business assets, we are a shell company as defined by the rules of the SEC under
the Securities Exchange Act of 1934. Our Board of Directors, on a time available basis, will
search for, review and engage in due diligence for potential merger or acquisition proposals for
which the Board of Directors would deem to be suitable acquisition candidates. To date, no such
acquisition or merger proposal has been identified. If our Board of Directors is able to identify
a potential merger or acquisition candidate, we cannot predict in what industry or business this
candidate may operate.
We will continue to incur ongoing losses, which are expected to be greatly reduced due to the
inactive nature of our business following the sale of our assets to HDNet and the winding down of
IFLC. However, losses will be incurred to pay ongoing reporting expenses, including legal and
accounting, as necessary to maintain the Company as a public entity, as well as some minimal
operating expenses and insurance premiums for directors and officers liability and other
insurance, while searching for merger or acquisition candidates. In addition, we will incur costs
related to the termination of employees and satisfying our pre-existing severance obligations with
these employees.
14
In connection with the sale of substantially all of our assets to HDNet, the assets sold to
HDNet included the name International Fight League, our corporate name. We have entered into a
name use agreement with HDNet which permits us to use International Fight League for general
corporate purposes until the earlier of (a) two years or (b) becoming involved in any active trade
or business (other than the use of the name for general corporate purposes). The only assets we
currently have are cash and cash equivalents, prepaid expenses (consisting of prepaid insurance
premiums), and miscellaneous computer equipment.
Due to the September 15, 2008 bankruptcy filing by IFLC, IFLC ceased being a consolidated
subsidiary as of that date. As a result, our balance sheets as of June 30, 2009 and December 31,
2008 include only the assets and liabilities of International Fight League, Inc., the parent
company, and our statement of operations for the three and six months ended June 30, 2009 excludes
the results of operations of IFLC. The results of IFLC prior to the bankruptcy filing are
consolidated in our financial statements and are shown as discontinued operations.
Corporate History
Prior to November 29, 2006, we were known as Paligent Inc., a Delaware corporation
(Paligent). On November 29, 2006, we acquired IFLC, then known as International Fight League,
Inc., a privately held Delaware corporation, by a merger (the Merger) pursuant to an agreement
and plan of merger (the Merger Agreement). Immediately following the Merger, we changed our name
to International Fight League, Inc. and IFLC changed its name to IFL Corp. and continued to operate
the business of organizing and promoting a mixed martial arts sports league under the name
International Fight League.
The Merger has been accounted for as a reverse acquisition under the purchase method of
accounting for business combinations in accordance with generally accepted accounting principles in
the United States. Reported results of operations of the combined group reflect the operations of
the Company and IFLC, except as otherwise disclosed in his report.
Results of Operations
We had a loss of $180,814 for the three months ended June 30, 2009, less than $0.01 per share,
as compared to a loss of $2,447,278, or $0.03 per share in the June 30 quarter of 2008, of which
$288,747 was from continuing operations and $2,158,531 was from discontinued operations. For the
six months ended June 30, 2009, we had a loss of $514,774, or $0.01 per share, as compared to a
loss of $4,758,876, or $0.06 per share, for the comparable period in 2008, of which $529,158 was
from continuing operations and $4,229,718 was from discontinued operations. Because we have no
operations, no revenues were generated during the three or six month periods ended June 30, 2009.
Selling, general and administrative expenses were $18,000 and $65,000 for the three and six month
periods ended June 30, 2009, respectively, significantly lower than the $220,000 and $422,000 for
the comparable periods in 2008, due to cost reductions and reductions in staff beginning in the
second quarter of 2008, and the Company still having operations in the first six months of 2008.
The expenses for the three months ended June 30, 2009 were also lower due to a $27,000 tax refund
that was credited against expenses. Share-based compensation expense for the June 30, 2009 quarter
was $31,000 and 159,000 for the six months ended June 30, 2009, of which $95,000 was attributable
to the final vesting of restricted stock. Share-based compensation expense for the second quarter
of 2008 was $165,000, of which $79,000 was from continuing operations and $86,000 is included in
discontinued operations. During the three months ended June 30, 2009, interest income of $57 was
earned on available cash balances compared to $12,000 for the second quarter of 2008, a significant
decrease due to the significantly lower cash balances.
Liquidity, Capital Resources and Going Concern
At June 30, 2009, our cash and cash equivalents were $87,719.
15
We are exploring options to realize value for our stockholders, which may include seeking a
reverse merger transaction with a party having ongoing operations. We have no present avenues of
financing, no source of revenues and no present plans to obtain interim financing while continuing
to explore our options.
As a result of the foregoing, our lack of liquidity and funding sources pose a substantial
risk to our ongoing viability. The condensed financial statements in this report have been
prepared on a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The forgoing conditions raise
substantial doubt about our ability to continue as a going concern.
Off-Balance Sheet Arrangements
As of June 30, 2009, we had no off-balance sheet arrangements.
|
|
|
Item 3. |
|
Quantitative and Qualitative Disclosure About Market Risk |
Not applicable.
|
|
|
Item 4. |
|
Controls and Procedures |
Evaluation of Disclosure Controls and ProceduresUnder the supervision and with the
participation of management, including our President and Chief Financial Officer, we conducted an
evaluation of the effectiveness of our disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of
the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the
President and Chief Financial Officer concluded that our disclosure controls and procedures have
not been operating effectively as of the end of the period covered by this report.
In connection with the preparation of this Quarterly Report on Form 10-Q, management
identified a material weakness due to insufficient resources in the accounting and finance
departments, resulting in (i) ineffective review, monitoring and analysis of schedules,
reconciliations and financial statement disclosures and (ii) the misapplication of U.S. GAAP and
SEC financial reporting requirements. Due to the lack of resources that are appropriately
qualified in the areas of U.S. GAAP and SEC financial reporting, and the potential impact on the
financial statements and related disclosures and the importance of the interim financial closing
and reporting process, in the aggregate, there is more than a remote likelihood that a material
misstatement of the financial statements would not have been prevented or detected.
Changes in Internal Control Over Financial Reporting There have been no changes in our
internal control over financial reporting during the quarter ended June 30, 2009 that have
materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting. Accordingly, we continue to have a material weakness in our internal control
over financial reporting as disclosed in Item 9A(T) of our Annual Report on Form 10-K for the year
ended December 31, 2008.
16
PART IIOTHER INFORMATION
|
|
|
Item 1. |
|
Legal Proceedings |
On September 15, 2008, our wholly-owned subsidiary, IFLC, through which we conducted our
operations, voluntarily filed a petition for reorganization relief under chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York.
IFLCs bankruptcy case is docketed as In re IFL Corp., Case No. 08-13589 (MG). On August 5, 2009,
the Court approved a disclosure statement (Disclosure Statement) filed by IFLC, which described
its plan of liquidation, which is attached to the Disclosure Statement (the Plan). Pursuant to
the Plan, IFLCs remaining assets will be used to satisfy its creditors, and IFLIs equity interest
in IFLC will be terminated with no payment. A hearing to confirm the Plan is scheduled for
September 14, 2009. If confirmed by the Court, the Plan will result in the liquidation of IFLC
soon after its confirmation. The Disclosure Statement and Plan are filed as exhibits to this
report.
There have been no material changes in the risk factors that were previously disclosed in Item
1A, Risk Factors, of Part I of the Companys Annual Report on Form 10-K for the year ended
December 31, 2008.
|
|
|
Item 2. |
|
Unregistered Sales of Equity Securities and Use of Proceeds |
None.
|
|
|
Item 3. |
|
Defaults Upon Senior Securities |
None.
|
|
|
Item 4. |
|
Submission of Matters to a Vote of Security Holders |
None.
|
|
|
Item 5. |
|
Other Information |
None.
See Exhibit Index on page 19 for a description of the documents that are filed as Exhibits to
this report on Form 10-Q or incorporated by reference herein.
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
INTERNATIONAL FIGHT LEAGUE, INC.
|
|
|
By: |
/s/ Michael C. Keefe
|
|
|
|
Michael C. Keefe |
|
|
|
President, Chief Financial Officer and General Counsel |
|
|
Date: August 19, 2009
18
EXHIBIT INDEX
|
|
|
Exhibits |
|
|
|
|
|
31.1
|
|
Certification of the Principal Executive Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
31.2
|
|
Certification of the Principal Financial Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 (included
in Exhibit 31.1 of this report). |
|
|
|
32.1
|
|
Certification of the Principal Executive Officer and
Principal Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
99.1
|
|
Disclosure Statement for IFL Corp.s Plan of Liquidation. |
|
|
|
99.2
|
|
IFL Corp.s Plan of Liquidation (attached as Exhibit A for
IFL Corp.s Disclosure Statement filed as Exhibit 99.1 to
this report). |
19